{"id":5819,"date":"2010-04-26T13:22:45","date_gmt":"2010-04-26T02:22:45","guid":{"rendered":"https:\/\/riskinfo.com.au\/news\/?p=5819"},"modified":"2020-06-25T09:50:00","modified_gmt":"2020-06-24T23:50:00","slug":"government-bans-commissions-risk-not-included-yet","status":"publish","type":"post","link":"https:\/\/riskinfo.com.au\/news\/2010\/04\/26\/government-bans-commissions-risk-not-included-yet\/","title":{"rendered":"Government Bans Commissions &#8211; Risk Not Included&#8230; Yet"},"content":{"rendered":"<p>The Federal Government has announced it will ban all adviser commissions and volume bonus payments from 1 July 2012.<\/p>\n<p>The exception to the ban\u00a0will be commissions on risk insurance, which the Government says\u00a0&#8216;&#8230; will be considered at a later date.&#8217;<\/p>\n<p><!--more-->The announcement that commissions are to be banned is included in a package of reforms called <em><a href=\"http:\/\/ministers.treasury.gov.au\/Ministers\/ceba\/Content\/pressreleases\/2010\/attachments\/036\/Future_of_Financial_Advice_Information_Pack.pdf\" target=\"_blank\" rel=\"noopener noreferrer\">The Future of Financial Advice<\/a><\/em>, released today by Minister for Financial Services, Superannuation and Corporate Law, <strong>Chris Bowen<\/strong>.<\/p>\n<h6>the reforms &#8230; are designed to tackle conflicts of interest<\/h6>\n<p>In what the Minster&#8217;s office refers to as an &#8216;Overhaul of Financial Advice&#8217;, Mr Bowen said the reforms &#8220;&#8230; are designed to tackle conflicts of interest that have threatened the quality of financial advice that has been provided to Australian investors, and the mis\u2011selling of financial products that culminated in high profile corporate collapses&#8230;&#8221;<\/p>\n<p>The package of reforms is the Government&#8217;s response to the PJC Inquiry into Financial Products and Services (the Ripoll Inquiry) and include the following initiatives:<\/p>\n<ul>\n<li>A prospective ban on conflicted remuneration structures including commissions and volume based payments, in relation to the distribution and advice of retail investment products including:\n<ul>\n<li>Managed investments<\/li>\n<li>Superannuation<\/li>\n<li>Margin loans<\/li>\n<\/ul>\n<\/li>\n<li>The introduction of a statutory fiduciary duty so that financial advisers must act in the best interests of their clients (Ripoll Recommendation No 1)<\/li>\n<li>Increasing transparency and flexibility of payments for financial advice by introducing &#8216;adviser charging&#8217; that will help align the interests of the financial adviser and the client<\/li>\n<li>Percentage-based (assets under management) fees will only be charged on ungeared products or investment amounts and only if this is agreed to with the retail investor<\/li>\n<li>Expansion of\u00a0the availability of low-cost (intra-fund)\u00a0advice within a superannuation context, eg:\n<ul>\n<li>Transition to retirement<\/li>\n<li>Intra-pension advice<\/li>\n<li>Nomination of beneficiaries<\/li>\n<li>Superannuation and Centrelink payments<\/li>\n<li>Retirement planning generally<\/li>\n<\/ul>\n<\/li>\n<li>Removal of the exemption permitting accountants to provide advice on the establishment and closing of self-managed superannuation funds (SMSFs) without holding an Australian Financial Services Licence<\/li>\n<li>Strengthening the powers of ASIC to act against unscrupulous operators<\/li>\n<li>The examination of a statutory compensation scheme<\/li>\n<\/ul>\n<h6>The Government has delayed any decisions on risk insurance commissions because of concerns it has about affordability and the potential for under-insurance<\/h6>\n<p>The Government has delayed any decisions on risk insurance commissions because of concerns it has about affordability and the potential for under-insurance. \u00a0It sees insurance as having &#8216;&#8230; different features from investment products, including the fact that there are no investment funds which might be used to pay for advice.&#8217;<\/p>\n<p>The reform\u00a0document says there will be further consultation about whether to extend the ban to risk insurance, including group insurance.<\/p>\n<p>Of the other key reforms, advisers should note the Government&#8217;s intention to introduce a &#8216;product neutral&#8217; adviser charging regime:<\/p>\n<p>&#8216;Advisers will be required to agree their fees directly with clients and disclose the charging structure to clients in a clear manner, including as far as practicable, total adviser charges payable, expressed in dollar terms.&#8217;<\/p>\n<h6>If the client does not renew the services, the adviser cannot continue to charge the client<\/h6>\n<p>Further, advisers will only be able to charge ongoing advice fees if a payment plan has been agreed with the client, or if the charge relates to the provision of an ongoing service.\u00a0 If the client does not renew the services, the adviser cannot continue to charge the client.<\/p>\n<p>Commenting on the commission element of the reform package, AFA President, <strong>Jim Taggart<\/strong>, said that in banning commissions the Government not only denies consumers the fundamental right to choose how they pay for advice, but goes one step further and dictates how they remunerate their advisers:<\/p>\n<p>&#8220;It is a major concern that in a free market, the Government should consider it necessary to legislate how any professional in any industry should be remunerated,&#8221; said Mr Taggart.<\/p>\n<p>IFSA CEO, <strong>John Brogden<\/strong>, welcomed Government&#8217;s reform announcements as a win for consumers and one that will build trust between financial advisers and the community:<\/p>\n<p>&#8220;Our objective is to create a financial services industry where advice is transparent, of the highest quality and available to all Australians. This package, in addition to industry initiatives to enhance customer control and ban commissions on superannuation, will substantially achieve these outcomes,&#8221; said Mr Brogden.<\/p>\n<p><a href=\"http:\/\/ministers.treasury.gov.au\/Ministers\/ceba\/Content\/pressreleases\/2010\/attachments\/036\/Future_of_Financial_Advice_Information_Pack.pdf\" target=\"_blank\" rel=\"noopener noreferrer\">Click here<\/a> to access the Government&#8217;s <em>Future of Financial Advice <\/em>reforms, noting a detailed summary of adviser remuneration reform is contained in Appendix B.<\/p>\n<p>We welcome your comments on this major announcement&#8230;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Federal Government has announced it will ban all adviser commissions and volume bonus payments from 1 July 2012. The exception to the ban\u00a0will be commissions on risk insurance, which the Government says\u00a0&#8216;&#8230; will be considered at a later date.&#8217;<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8,270],"tags":[],"class_list":{"0":"post-5819","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-compliance-regulation","7":"category-remuneration"},"_links":{"self":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/5819","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/comments?post=5819"}],"version-history":[{"count":0,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/5819\/revisions"}],"wp:attachment":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/media?parent=5819"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/categories?post=5819"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/tags?post=5819"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}